UPDATE 1-Tunisia to lay off 16,500 public sector workers in 2017 and 2018

Reuters Staff

3 Min Read

(Updates, adds details)

By Tarek Amara

TUNIS, Oct 26 (Reuters) - Tunisia will ask the United States for a $500 million loan guarantee as it seeks to lay off about 16,500 public sector workers in 2017 and 2018, a senior government official told Reuters.

The layoffs, which the government aims to make voluntary but which are demanded by its international lenders, come from a a public sector workforce of around 700,000.

Tunisia will ask this new guarantee loan as it prepares to issue bonds on financial markets next year. It will need about 7.4 billion dinars ($3 billion) in foreign loans including 1.4 billion dinars from the sale of bonds.

Since the 2011 uprising that ended the rule of former president Zine El Abidine Ben Ali, the United States has guaranteed about $1 billionin loans to Tunisia to support its democratic transition.

“We will ask U.S. for a $500 million guarantee loan.. Tunisia is counting on U.S, support to support its economic transition”, the official, who asked not to be named said.

Tunisia is under pressure from the International Monetary Fund (IMF) and its partners to speed up reforms to create jobs and cut its deficit after its tourism sector was hit by militant attacks in 2015.

In April, the IMF agreed to release a delayed $320 million tranche of Tunisia’s $2.8 billion in loans, on condition that it raise tax revenue, reducing the public wage bill and cut popular energy subsidies.

“6500 public sector workers are already applying to leave this year and we aims to lay off 10,000 others voluntary with financial incentives next year”, the official said.

“We hope Tunisia’s public sector wage bill will reach 12 percent of GDP in the next three years versus 14.5 percent now with these reforms”, he added.

Six years after the uprising against Ben Ali’s autocratic rule, Tunisia has made progress towards democracy. But successive governments failed to push through some of the painful reforms needed to overhaul public spending.

A delegation from the IMF will be in Tunis by the end of this month to discuss the progress of reforms before deciding on a new tranche of the $2.8 billion loan.

Under the 2018 budget, the deficit will fall to 4.9 percent of gross domestic product in 2018, from about 6 percent expected in 2017. Tunisia also seeks to raise GDP growth to about 3 percent next year against 2.3 percent this year. (Reporting by Tarek Amara; Editing by Jeremy Gaunt)